What output-capital ratio to adopt for macroeconomic calibrations?

Abstract

Regarding the output-capital ratio in heterodox macroeconomic simulation studies, a surprisingly wide range of numerical values can be found. The paper discusses quarterly US data that are publicly available where, in order to capture depreciation, the construction of the capital stock by the perpetual inventory method relies on detailed estimates of its lifetime. Subsequently the paper builds up a capital stock series by alternatively having recourse to the statistics about capital consumption and furthermore determining an initial level by an assumption about the long-term growth of capital. This procedure leads to somewhat different results. In addition, the rates of depreciation and profit are studied that are implied by the two approaches. The paper closes with two numerical proposals for the steady state values of these variables and the output-capital ratio that could be readily employed for macrodynamic modelling, and that are quite different from many of the aforementioned examples.